Columnists

Investing trends to look out for in new year

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People pose with a replica of the Charging Bull known as the Wall Street Bull statue outside Sao Paulo’s Stock Exchange headquarters in Sao Paulo, Brazil. PHOTO | AFP

Summary

  • As we dive into 2022, some notable sectors and industries may boom because of the fundamental shifts experienced this year.
  • Covid-19 regulations reduced cash transactions and accelerated the adoption of a cashless economy.
  • In 2021, the creator economy reached over 50 million people worldwide as individuals leveraged the power of social media platforms to sell their creations.

This year was a great investing period for several stocks in both local and international markets. If you missed impressive profits this year, do not worry, there will be more opportunities for you to benefit in 2022 and beyond.

This was a buildup from last year, which was quite vibrant for stock traders globally as central banks lowered interest rates thereby reducing the cost of funds. Various economies also implemented stimulus packages to support businesses and households, which catalysed improved economic performance.

Key global stocks performed exceptionally in 2021 with huge price increases. These include Nvidia, which gained 142 percent, Cloudflare 148 percent, Crocs 177 percent, Dillard’s 607 percent, Moderna 147 percent, and Simon’s Property Group 104 percent. The S&P 500 index, the benchmark index for US equities is up 27 percent year-to-date.

The improved performance was reported in stock prices for several industries including semi-conductors manufacturers due to a global shortage, the retail sector as governments eased Covid-19 restrictions, vaccine producers as demand for jabs skyrocketed and fossil fuel energy as oil prices surged by over 60 percent.

Shipping stocks improved as global supply chains were pressured leading to rising freight costs, and real estate stocks as lower interest rates stimulated demand for mortgages.

As we dive into 2022, some notable sectors and industries may boom because of the fundamental shifts experienced this year. For instance, a recent change in the working environment, which allows staff to work from home and the office, could create a higher demand for cloud computing products. This means that cloud computing stocks could rise going forward.

Since the onset of the pandemic in March 2020 major shifts have been witnessed in shopping trends. Consumers increasingly prefer online channels to traditional brick-and-mortar experiences.

Covid-19 regulations reduced cash transactions and accelerated the adoption of a cashless economy. This created a high demand for mobile transactions processing apps such as M-Pesa and Cash App.

People are getting used to these apps due to the convenience they offer as well as additional services available from these apps such as Buy Now Pay Later and overdraft features. In 2022, we could see further innovation in this space and a possible boom in payments processing stocks.

In 2021, the creator economy reached over 50 million people worldwide as individuals leveraged the power of social media platforms to sell their creations. These include bloggers, influencers, vloggers, musicians, online educators, and curators among many other categories of creators.

Over the past two decades, giant social media platforms such as Facebook and Twitter made billions of dollars while those who created content on these platforms earned nothing. In the new wave of creator economy empowerment, platforms are realising the value of these creators and are willing to create an environment for them to earn value for their content.

Brands have also realised the value of these creators and are willing to include them in their sales and marketing budgets. Stocks in the creator economy could rise significantly in 2022.

Recent innovations in gaming have created a buzz of online gaming activity. This includes the application of artificial intelligence in gaming environments, the introduction of non-fungible tokens (NFTs) collectibles in gaming environments, virtual reality, augmented reality, and extended reality devices for gaming.

The forced stay-at-home period also accelerated demand for online gaming, which is likely to continue next year.

Following the recent Glasgow climate change conference, participating countries are expected to start implementing some of the signed agreements. This includes phasing out coal plants and increasing dependence on green energy.

This could drive demand for solar, hydro, and wind power generation products. On the emission reduction framework, governments are expected to enhance support for zero-emission electric cars in 2022, which may lead to a rise in the value of electric vehicle stocks such as Tesla and NIO.

The technology used to develop Covid-19 vaccines was relatively new and is very effective in developing jabs against other viruses. Companies in the biotech sector are already developing vaccines for known diseases such as malaria, cancer, and HIV/Aids.

The advantage of mRNA technology is that it is faster, less costly compared to traditional vaccines, and highly effective. In 2022, we expect clinical trials for vaccines against major ailments to which we did not have a solution before Covid. This could create enormous opportunities for stock traders in the biotech sector.

As we head for Christmas, young investors should use this time to educate themselves about trading in the financial markets and develop an investment plan so that they can close 2021 with a well-laid-out plan to achieve financial freedom in 2022 and beyond.

Rufas Kamau is a Research and markets analyst at Scope Markets Kenya